The Year of the Low-Wage Worker

Posted on Jan 3, 2014

By Sonali Kolhatkar

If the state of the U.S. economy were measured by how the vast majority of Americans are faring, rather than by stock prices on Wall Street, this year’s much-touted economic recovery would be a bust. More than a million Americans who have been jobless for at least six months are set to lose unemployment benefits because Congress refused to extend them. When the congressional budget deal that excluded the benefits extension was reached in early December, President Barack Obama called it “a good first step,” and everyone celebrated because both major parties had finally agreed on something.

But this year, refusing to wait for lawmakers to take action on poverty, low-income Americans organized and rose up in numbers not seen in recent years. They demanded better working conditions and pay, and the right to form unions. Workers at Walmart and fast food outlets like McDonald’s had the most high-profile actions of the year. But numerous other movements have also emerged, such as teachers in North Carolina organizing a “walk-in” to protest education cutbacks, Amazon workers in Delaware filing a petition for a union, and transit union workers in California’s Bay Area striking for a better contract.

Perhaps the scattered labor actions are prompting Obama to speak out against income inequality, as he did on Dec. 4. Perhaps organized labor is finally influencing the president. Or perhaps it is simply a coincidence that he gave a major speech about the growing income gap between the rich and poor in the United States just a day before fast food workers in 100 cities around the nation went on strike demanding living wages in early December. Even if there is no coordination between unions and the White House, a national dialogue about wages and working conditions for the bottom 99 percent of Americans is certainly past due.

Obama chose to give his speech in Anacostia, one of the most poverty stricken neighborhoods in Washington, D.C., where predominantly African-American residents face an unemployment rate of 20 percent. In an interview after the speech, economist Max Fraad Wolff told me it was different from the president’s previous remarks about income inequality because Obama seemed to offer a “much more full throated endorsement of a significant increase in the minimum wage.”

In addition to spotlighting the embarrassingly low federal minimum wage, currently set at $7.25 an hour, the president’s wide-ranging speech also invoked the astronomical rate of CEO pay, the weakened state of unions, childhood poverty, the folly of trickle-down economics, and the importance of health care. Perhaps most importantly, he dared to bring up the issue of class, saying, “The opportunity gap in America is now as much about class as it is about race, and that gap is growing. ... We have to reject a politics that suggests any effort to address it in a meaningful way somehow pits the interests of a deserving middle class against those of an undeserving poor in search of handouts.”

Wolff agreed with Obama, saying, “It’s long been true that in a country that won’t talk about class inequality, there becomes a conflation between class and race and if we’re going to be completely honest here, the Republican Party has fairly artfully used that to make it about ‘those other people’ taking government services and handouts, trying to dodge taxes. And what that’s produced over the last 30 years is a lower middle-income white population that’s literally often excitedly voting for its own destruction and the notion that what they’re doing is preventing the undeserving poor—who, in their imaginations, are often people of color—from getting undeserved services. And this has left the higher-income echelons of the U.S. to more or less walk away with the whole pie.”

While Obama called income inequality the “defining challenge of our time” and something that “drives everything I do in this office,” his words ring hollow. This is a president who has failed to rein in the recklessness of Wall Street, remove corporate loopholes, adequately deal with growing student loan debt or bring justice to those who lost their homes in the mortgage crisis.

As Wolff warns, “It looks to me that there’s going to be an unfortunately large gap here between rhetoric and the legislative policy proposals.” In spite of political lethargy in Washington, D.C., there has been some success at the local and state level to boost the minimum wage. The city of SeaTac in Washington state raised its minimum wage to $15 an hour in a recent election. California’s legislature passed a bill increasing the state’s to $9 an hour, while New Jersey raised its by $1 to $8.25.

It is one thing to lift the boats of low-wage earners, but what about the fact that America’s rich are continuing to reap obscene benefits? Wolff continued his criticism of Obama, saying, “We haven’t even really seen an aggressive attempt [by the president] to halt upward redistribution. If we want better distribution of income ... we need to first stop actively redistributing wealth upward.”

The idea that anyone can attain astronomical wealth is a delusion that is deeply ingrained in American culture. So while taxing the rich to halt upward redistribution of wealth may now be more popular than ever, a third of the population still opposes it.

An examination of the wealth distribution in the U.S. reveals just how obscenely skewed it is toward the opulent. The richest 400 Americans now are worth more than the combined net worth of half of all Americans, and more than the annual GDP of some entire countries.

A recent report by the Institute for Policy Studies shows one specific way in which wealthy Americans redistribute wealth upward. The report’s author, Sarah Anderson, found that McDonald’s “CEO in 2011 and the first half of 2012, James Skinner, pocketed $31 million in exercised stock options and other fully deductible ‘performance pay.’ Incoming CEO Donald Thompson took in $10 million in performance pay in his first six months on the job.”

What Anderson has found is that fast food companies like McDonald’s are deducting these forms of so-called performance pay from their taxes, which amounts to a government subsidy. In fact, finds Anderson, “CEOs of the top six publicly held fast food chains pocketed more than $183 million in fully deductible ‘performance pay,’ lowering their companies’ IRS bills by an estimated $64 million.”

Anderson told me in an interview that “there’s this crazy idea out there that we’re a country that’s broke and the only way to address our budget is to slash spending on things like Social Security and teachers and things that make a real difference for ordinary Americans, and the reality is we are such a rich country. The problem is we have so many of these loopholes and other tricks that have been used to put so much of our resources into the pockets of wealthy CEOs and other individuals.”

There are some silver linings however. The Securities and Exchange Commission is now considering a new rule, part of the Dodd-Frank Act, requiring the reporting of how CEO pay compares to a company’s lowest-paid workers. While it won’t actually halt the upward redistribution of wealth, the rule will highlight the unbelievable fact that the average ratio of CEO-to-worker pay is about 350 to 1.

Lowering that ratio is not a pipe dream, at least on the international stage. France’s government, led by Socialist Francois Hollande, recently upheld a new law taxing millionaires at a de facto rate of 75 percent, up from an earlier rate of 66 percent. And a Swiss effort to cap CEO pay at 12 times the wage of a company’s lowest-paid worker inspired activists worldwide even though it failed after an advertising blitz by corporate opponents.

On the streets of American cities, low-wage workers are refusing to wait for policymakers in Washington, D.C., to address poverty and are taking matters into their own hands. On Dec. 5, a day after the president’s speech, workers from various fast food outlets walked out of their jobs in at least 100 American cities. The major coordinated action followed a similar effort in August and came less than a week after Black Friday labor protests by Walmart employees. The fast food workers want higher wages—specifically $15 an hour—and the right to form a union. Unions like the SEIU and Change to Win have been working behind the scenes to fund the workers’ actions and provide logistical support and guidance.

In Los Angeles, workers from various fast food outlets walked off the job and picketed outside a McDonald’s restaurant on Sunset Boulevard, holding signs saying “Fight for $15.” I went to the strike to speak with some of the workers and organizers and met Sonia Roldan, a young woman who works for McDonald’s. Roldan told me, “At first I wasn’t sure what this movement was all about, but then, when I got introduced to the organizer at our store, she began making sense of all the rights we as workers have. That’s what motivated me and other people who have been working there and receiving very low wages.” Roldan, who lives with her family, tries to contribute toward the rent and acknowledges that “I don’t have enough by the end of the month and sometimes I have to rely on my mother who has my two youngest siblings to take care of as well. ... It stresses me out.”

The most powerful piece of advice to fellow workers at the rally came from a young man named Leo Valdez who works for Office Max. Valdez had walked off his job to be there in solidarity with the fast food workers and because “I also make low wages.” Valdez told me, “I’m extremely excited. We need to get the message out to all low-paid workers that we need to organize because your companies want you demobilized, demoralized, misinformed and, most importantly, submissive.”

Valdez added defiantly, “They don’t want you being a disobedient worker so you need to disobey once in a while, to speak up.”